ChartWatch: Something Big is Brewing

Citigroup (NYSE: C) is on the verge of a massive move. However, the chart isn’t tipping us off as to which direction the stock will take.

The shares reside within a huge channel (blue lines). Not only has this channel been in place for a while (15 months), it’s massive in size, ranging from $24.50 to $38.

This chart shows the price of C shares along with an important channel pattern to monitor.

Citi’s stock is currently banging against channel resistance. If this resistance holds, the shares have a long way to fall within the current range. Alternatively, the shares may break out of the pattern, inducing a rally that could initially reach as high as $51.50.

Either way, it appears that a monster move is coming.

Bullish traders should watch to see if $38.50 breaks next month. A move beyond that price could provide the first signal that the shares are preparing to advance to $51.50.

Though $35 is a primary support area (read more about that here), bearish traders may want to watch the $32 zone more closely. Buyers would protect that level if the stock was preparing to rally. This means that any push below $32 is an opportunity to short the shares, profiting from a move lower to the bottom of the channel.

The stock has experienced a nice ride over the past four months. Citi will need to expand on that positive momentum if it expects to rally back up to its 2011 high.

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